Institutional Design for Growth

This program covers a broad range of issues, regarding the institutional framework necessary to insure much greater stability of government policies, their design in support of growth, legal security, competitiveness, transparency and social participation. It pays attention not only to regulations and organizational structures but also to what people understand institutions to be – how they interpret and apply them.

CEVES considers of outmost importance to tackle early on two fundamental institutional problems:

The absence of adequate government planning and accountability systems which significantly reduces Serbia’s capacity to deliver adequate support to economy and in great measure responsible for extreme policy instability which directly hurts its economic growth;

Incomplete transition from “social” to private property which results in serious regulatory inconsistences, blocks implementation of regulatory change and leads to a decentralized obstructive bureaucratic behavior towards private undertakings and enterprises. CEVES will seek to conduct smaller projects targeted at specific issues, as the opportunity might arise, through which it can build its understanding of these issues, and argumentation of the need, to tackle them.

Subprograms

While there is widespread awareness that Serbia’s government institutions are dysfunctional in the sense that there is simply no accountability, this is generally treated as the individual, personal flaw of political leadership. In fact, this is a systemic flaw and it will take an enormous amount of leadership to fix it. The system, of course, does not help the development of good leadership, it helps corrupt it instead. It is important, therefore, to start from raising awareness in the country of the way in which the system is flawed, and how it ends up corrupting leadership. This requires a meticulously argued comparative study that requires considerable preparatory work before a well-formulated proposal can be developed. As it prepares this proposal, CEVES will complete smaller sub-studies, and use them to start popularizing this issue, as well as to start building capacity where the need is apparent. To begin with, as CEVES reviews the country’s strategies (as suggested in the Economic Opportunity Monitor) it will also seek to throw light on the process of their adoption and the when and why true strategic choices were not made. Once this issue is better understood, CEVES will draft and advocate for a government performance and accountability act. Projects under this subprograms:

A comparative study of Serbia’s Government Coordination, Planning and Accountability Practices

Over the past decade Serbia had adopted much regulatory change, mainly directed at approximation with the acquis communautaire as well as at efforts at regulatory simplification and liberalization. A permanent Office for Regulatory Reform and Impact Assessment was established and more than one “regulatory guillotine” was performed. However, there remains clash between the understanding of the “market” inherited from self-management times, and that necessary today, which to this date has not been targeted by reform efforts. The conceptual confusion is not only producing regulatory and legislative inconsistencies, but also blocking implementation, introducing arbitrariness in judiciary interpretation of the law. Consequently, this has created legal insecurity and fertile ground for corruption. For example, given the essence of social property – that it was not truly owned by the state, i.e. it was dealt with in a fully decentralized manner – the legal/bureaucratic system was constructed to protect property from reckless (or just risky) disposing, i.e. full of administrative (also decentralized) second-guessing of the “owners’” decision-making. Many administrators today still do not understand that it is not their duty to protect private property from the proprietors’ decision-making, rather only to protect contracts. It is telling that Serbia is the only former-Yugoslav country that still recognizes social property in its constitution, although there is evidence that the others also suffer from similar problems. CEVES will also look for opportunities to study more specifically the difficulties companies face when entering and exiting the market, as well as the role of the legal framework for property relations law and its implementation in practice, focusing on bankruptcy procedures, enforcement, and the protection of parties in a contract from being misled and abused. In particular, this third issue — the possibility for an individual to serially establish business ventures that fail to honor their commitments and cause damage to clients and partners– is greatly hurting the business environment, especially by damaging the trust that is so necessary for a healthy market economy. Projects under this subprograms:

The incomplete conceptual transition, described above, has created an ethical confusion whereby the public is often not able to distinguish between the legitimate acquisition of wealth and corruption. True corrupt behavior is harder to stigmatize if almost any normal market behavior is considered unethical. At the same time this program area will seek to rely on, and contribute to, the rich field of study of entrepreneurship to throw light on the nature of entrepreneurship in Serbia, and how institutional change can contribute to its constructive spirit.